CONSTRUCTAL THEORY AND ECONOMIC CYCLE

Radu Iasic () and Cristian Paun
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Radu Iasic: University of Economic Studies Bucharest

Romanian Economic Business Review, 2020, vol. 15, issue 2, 14-24

Abstract: More and more economists are talking about an impending crisis, even people who have no economic concerns are waiting for it. Economists discuss the extent and depth of this future crisis and analyze the possible consequences and how we can overcome them. The past fight against the diminution of the amplitude of the economic cycles has proved its limits and the measures taken have only prepared a new cycle and a new crisis. As H. Minsky has observed, the struggle to get out of the straits of a crisis contains the germs of a new cycle. There has been much written about business cycles and there are around 12 theories trying to penetrate in this curious world of regular variations of economic indicators. All these theories have in our opinion a limited view of the economy and attack economic cycles from perspectives that are often fruitless and harmful in the long run. In the last period, a theory created by a Romanian professor who teaches in America, Professor Adrian Bejan, has easily penetrated from physics to the field of economic sciences, and the theory is called the constructal theory. It is a theory that is suitable for both a mathematical - empirical analysis and a priori deductive analysis. It is a theory that provides fertile ground for economic analysis and above all it is a theory that leads to conclusions similar to the Austrian School of Economics. In our opinion it is the theory that brings to light long-term social and economic mechanisms with a strong explanatory and predictive character at the trend level. Objections can be raised against this theory; objections that we will mention at the end of the article. In this article we want to make a brief presentation of the theory in economic vision to relate it to the past economic cycles and crises and especially to the future ones. The theory speaks of many economic flows; flow systems with multi-storey architecture; of hierarchical configurations as they occur naturally; of wealth differences that are a condition of economic existence. The whole social system, according to this theory, is a flow system that evolves over time, with a certain pattern, and evolution has the appearance of systems superposed with a certain configuration. Cycles occur when the decision makers erroneously intervene in the spontaneous architecture of the flow systems due to their misunderstanding. We consider this theory a fertile ground for future research with this vision. Surprisingly, this theory can be related to another theory coming from physics but with major implications in economics, namely the self-organizing criticality theory. But considering the economy of the article we will leave this link for the future.

Keywords: flow systems; hierarchical architecture; cycles; flows; financial system (search for similar items in EconPapers)
Date: 2020
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